A New Deal Fights the Depression

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MAIN IDEA WHY IT MATTERS NOW Terms & Names

After becoming president, Americans still beneﬁt from •Franklin Delano •Civilian Conser- Franklin Delano Roosevelt programs begun in the New Roosevelt vation Corps (CCC) used government programs Deal, such as bank and stock •New Deal •National Industrial to combat the Depression. market regulations and the •Glass-Steagall Act Recovery Act Tennessee Valley Authority. •Federal Securities (NIRA) Act •deﬁcit spending •Agricultural Adjust- •Huey Long ment Act (AAA)

One American's Story

Hank Oettinger was working as a printing press operator in a small town in Wisconsin when the Great Depression began. He lost his job in 1931 and was unemployed for the next two years. In 1933, however, President Roosevelt began creating work programs. Through one of these programs, the Civil Works Administration (CWA), Oettinger went back to work in 1933. As he later recalled, the CWA was cause for great celebration in his town.

A PERSONAL VOICE HANK OETTINGER “ I can remember the ﬁrst week of the CWA checks. It was on a Friday. That night everybody had gotten his check. The ﬁrst check a lot of them had in three years. . . . I never saw such a change of attitude. Instead of walking around feeling dreary and looking sorrowful, everybody was joyous.

Like a feast day. They were toasting each other. They had money in their pockets for the ﬁrst time.” —quoted in Hard Times Civil Works Administration Programs like the CWA raised the hopes of the American people and sparked workers prepare great enthusiasm for the new president. To many Americans, it appeared as if the for a parade for country had turned a corner and was beginning to emerge from the nightmare of workers in San the Great Depression. Francisco in 1934.

Americans Get a New Deal

The 1932 presidential election showed that Americans were clearly ready for a change. Because of the depression, people were suffering from a lack of work, food, and hope.

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ELECTING FRANKLIN DELANO ROOSEVELT Although the Republicans renom- inated President Hoover as their candidate, they recognized he had little chance of winning. Too many Americans blamed Hoover for doing too little about the depression and wanted a new president. The Democrats pinned their hopes on Franklin Delano Roosevelt, known popularly as FDR, the two-term governor of New York and a distant cousin of former president Theodore Roosevelt. As governor, FDR had proved to be an effective, reform-minded leader, working to combat the problems of unemployment and poverty. Unlike Hoover, Roosevelt possessed a “can-do” attitude and projected an air of friendliness and confidence that attracted voters. Indeed, Roosevelt won an overwhelming victory, capturing nearly 23 million votes to Hoover’s nearly 16 million. In the Senate, Democrats claimed a nearly two-thirds majority. In the House, they won almost three-fourths of the seats, their greatest victory since before the Civil War. WAITING FOR ROOSEVELT TO TAKE OVER Four months would elapse between Roosevelt’s victory in the November election and his inauguration as president in March 1933. The 20th Amendment, which moved presidential inaugurations to January, was not ratified until February 1933 and did not apply to the 1932 election. KEY PLAYYEERSS FDR was not idle during this waiting period, however. He worked with his team of care- fully picked advisers—a select group of professors, lawyers, and journalists that came to be known as the “Brain Trust.” Roosevelt began to formulate a set of policies for his new administration. This program, designed to alleviate the problems of the Great Depression, became known as the New FRANKLIN D. ROOSEVELT ELEANOR ROOSEVELT Deal, a phrase taken from a 1882–1945 1884–1962 campaign speech in which Born into an old, wealthy New A niece of Theodore Roosevelt Roosevelt had promised “a new York family, Franklin Delano and a distant cousin of her deal for the American people.” Roosevelt entered politics as husband, Franklin, Eleanor a state senator in 1910 and Roosevelt lost her parents at New Deal policies focused on later became assistant secre- an early age. She was raised MAIN IDEA three general goals: relief for the tary of the navy. In 1921, he by a strict grandmother. Summarizing needy, economic recovery, and was stricken with polio and As first lady, she often urged A What plans financial reform. A became partially paralyzed the president to take stands did Roosevelt from the waist down. He on controversial issues. A pop- make in the four THE HUNDRED DAYS On tak- struggled to regain the use of ular public speaker, Eleanor months while he ing office, the Roosevelt admin- his legs, and he eventually was particularly interested in waited to take istration launched a period of learned to stand with the help child welfare, housing reform, office? intense activity known as the of leg braces. and equal rights for women A. Answer He Roosevelt became governor and minorities. In presenting a Hundred Days, lasting from began to formu- of New York in 1928, and booklet on human rights to the late a set of March 9 to June 16, 1933. because he “would not allow United Nations in 1958, she policies to alle- During this period, Congress bodily disability to defeat his said, “Where, after all, do viate the prob- passed more than 15 major will,” he went on to the White human rights begin? . . . [In] lems of the pieces of New Deal legislation. House in 1933. Always inter- the world of the individual per- Depression. These laws, and others that fol- ested in people, Roosevelt son: the neighborhood . . . the gained greater compassion school . . . the factory, farm or lowed, significantly expanded for others as a result of his office where he works.” the federal government’s role in own physical disability. the nation’s economy.

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Roosevelt’s first step as president was to carry out reforms in banking and finance. By 1933, widespread bank failures had caused most Americans to lose faith in the banking system. On March 5, one day after taking office, Roosevelt declared a bank holiday and closed all banks to prevent further withdrawals. He persuaded Congress to pass the Emergency Banking Relief Act, which authorized the Treasury Department to inspect the country’s banks. Those that were sound could reopen at once; those that were insolvent—unable to pay their debts— would remain closed. Those that needed help could receive loans. This measure revived public confidence in banks, since customers now had greater faith that the open banks were in good financial shape. AN IMPORTANT FIRESIDE CHAT On March 12, the day before the first banks were to reopen, President Roosevelt gave the first of his many fireside chats— “ The only thing radio talks about issues of public concern, explaining in clear, simple lan- we have to fear guage his New Deal measures. These informal talks made Americans feel as if the president were talking directly to them. In his first chat, President is fear itself.” Roosevelt explained why the nation’s welfare depended on public sup- FRANKLIN DELANO ROOSEVELT port of the government and the banking system. “We have provided the machinery to restore our financial system,” he said, “and it is up to you to support and make it work.” He explained the banking system to listeners.

A PERSONAL VOICE FRANKLIN DELANO ROOSEVELT “ When you deposit money in a bank the bank does not put the money into a safe deposit vault. It invests your money. . . . A comparatively small part of the money that you put into the bank is kept in currency—an amount which in normal times Franklin D. is wholly sufficient to cover the cash needs of the average citizen.” Roosevelt holds his dog Fala and The president then explained that when too many people demanded their sav- MAIN IDEA talks to a young ings in cash, banks would fail. This was not because banks were weak but because Evaluating family friend. even strong banks could not meet such heavy demands. Over the next few weeks, Leadership many Americans returned their savings to banks. B B How successful was REGULATING BANKING AND FINANCE Congress took FDR’s fireside another step to reorganize the banking system by pass- chat? ing the Glass-Steagall Act of 1933, which established B. Answer the Federal Deposit Insurance Corporation (FDIC). The It was very successful. FDIC provided federal insurance for individual bank Many Americans accounts of up to $5,000, reassuring millions of bank returned their customers that their money was safe. It also required savings to banks to act cautiously with their customers’ money. banks, showing increased Congress and the president also worked to regulate the confidence in stock market, in which people had lost faith because of the the banking crash of 1929. The Federal Securities Act, passed in May sysem. 1933, required corporations to provide complete information on all stock offerings and made them liable for any misrepresentations. In June of 1934, Congress created the Securities and Exchange Commission (SEC) to regulate the stock market. One goal of this commission was to prevent people with inside information about companies from “rigging” the stock market for their own profit. In addition, Roosevelt persuaded Congress to approve a bill allowing the manufacture and sale of some alco- holic beverages. The bill’s main purpose was to raise government revenues by taxing alcohol. By the end of 1933, the passage of the 21st Amendment had repealed prohibition altogether.

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Helping the American People

While working on banking and financial matters, the Roosevelt administration also implemented programs to provide relief to farmers, perhaps the hardest hit by the depression. It also aided other workers and attempted to stimulate economic recovery. RURAL ASSISTANCE The Agricultural Adjustment Act (AAA) sought to raise crop prices by lowering production, which the government achieved by pay- Background ing farmers to leave a certain amount of every acre of land unseeded. The theory See supply and was that reduced supply would boost prices. In some cases, crops were too far demand on advanced for the acreage reduction to take effect. As a result, the government paid page R46 in the Economics cotton growers $200 million to plow under 10 million acres of their crop. It also Handbook. paid hog farmers to slaughter 6 million pigs. This policy upset many Americans, who protested the destruction of food when many people were going hungry. It did, however, help raise farm prices and put more money in farmers’ pockets. An especially ambitious program of regional development was the Tennessee Valley Authority (TVA), established on May 18, 1933. (See Geography Spotlight on page 520.) Focusing on the badly depressed Tennessee River Valley, the TVA renovated five existing dams and constructed 20 new ones, created thousands of jobs, and provided flood control, hydroelectric power, and other benefits to an impoverished region. PROVIDING WORK PROJECTS The administration also established programs to provide relief through work projects and cash payments. One important program, the Civilian Conservation Corps (CCC), put young men aged 18 to 25 to work building roads, developing Civilian Conservation Corps parks, planting trees, and helping in soil-erosion and flood-control projects. By the time the program ended • The CCC provided almost 3 million men in 1942, almost 3 million young men had passed aged 18–25 with work and wages between through the CCC. The CCC paid a small wage, $30 a 1933 and 1942. month, of which $25 was automatically sent home to the worker’s family. It also supplied free food and uni- • The men lived in work camps under a strict regime. The majority of the camps were forms and lodging in work camps. Many of the camps racially segregated. were located on the Great Plains, where, within a period of eight years, the men of the CCC planted more than • By 1938, the CCC had an 11 percent 200 million trees. This tremendous reforestation pro- African-American enrollment. gram was aimed at preventing another Dust Bowl. • Accomplishments of the CCC include C. Answer The The Public Works Administration (PWA), created in planting over 3 billion trees, developing TVA developed June 1933 as part of the National Industrial over 800 state parks, and building more an impoverished than 46,000 bridges. area by provid- Recovery Act (NIRA), provided money to states to ing flood control create jobs chiefly in the construction of schools and and power and other community buildings. When these programs by building failed to make a sufficient dent in unemploy- dams. Members of the CCC ment, President Roosevelt established the planted trees to Civil Works Administration in November help prevent 1933. It provided 4 million immediate another Dust jobs during the winter of 1933–1934. Bowl. Although some critics of the CWA MAIN IDEA claimed that the programs were Analyzing “make-work” projects and a waste Effects of money, the CWA built 40,000 C How did New schools and paid the salaries of more Deal programs affect various than 50,000 schoolteachers in America’s regions of the rural areas. It also built more than half United States? a million miles of roads. C

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PROMOTING FAIR PRACTICES The NIRA also sought to promote industrial growth by establishing codes of fair practice for individual industries. It created the National Recovery Administration (NRA), which set prices of many products to ensure fair competition and established standards for working hours and a ban on child labor. The aim of the NRA was to promote recovery by interrupting the trend of wage cuts, falling prices, and layoffs. The economist Gardiner C. Means attempted to justify the NRA by stating the goal of industrial planning.

A PERSONAL VOICE GARDINER C. MEANS “ The National Recovery Administration [was] created in response to an overwhelming demand from many quarters that certain elements in the making of industrial policy . . . should no longer be left to the market place and the price mechanism but should be placed in the hands of administrative bodies.” —The Making of Industrial Policy

The codes of fair practice had been drafted in joint meetings of businesses and representatives of workers and consumers. These codes both limited production and established prices. Because businesses were given new concessions, workers MAIN IDEA made demands. Congress met their demands by passing a section of the NIRA Evaluating guaranteeing workers’ right to unionize and to bargain collectively. D D How did Many businesses and politicians were critical of the NRA. Charges arose that the New Deal support labor the codes served large business interests. There were also charges of increasing organizations? code violations. D. Answer It FOOD, CLOTHING, AND SHELTER A number of New Deal guaranteed workers’ right to NOM programs concerned housing and home mortgage problems. unionize and to ECO IC The Home Owners Loan Corporation (HOLC) provided gov- bargain collec- ernment loans to homeowners who faced foreclosure because tively. they couldn’t meet their loan payments. In addition, the 1934 National Housing Act created the Federal Housing Administration (FHA). This agency continues to furnish loans for home mortgages and repairs today. Another program, the Federal Emergency Relief Administration (FERA), was funded with $500 million to provide direct relief for the needy. Half of the money was given to the states as direct grants-in-aid to help furnish food and clothing to the unemployed, the aged, and the ill. The rest was distributed to states to support work relief programs—for DEFICIT SPENDING every $3 within the state program, FERA donated $1. Harry John Maynard Keynes, an influen- Hopkins, who headed this program, believed that, whereas tial British economist, promoted money helped people buy food, it was meaningful work that the idea of deficit spending to enabled them to gain confidence and self-respect. stimulate economic recovery. In his view, a country should spend its way out of a depression by putting money into the hands of The New Deal Comes Under Attack consumers. This would make it possible for them to buy goods By the end of the Hundred Days, millions of Americans had and services and thus fuel eco- benefited from the New Deal programs. As well, the public’s nomic growth. Therefore, even if a confidence in the nation’s future had rebounded. Although government has to go deeply into President Roosevelt agreed to a policy of deficit spending— debt, it should spend great amounts of money to help get spending more money than the government receives in rev- the economy growing again. enue—he did so with great reluctance. He regarded deficit (See deficit spending on page R39 spending as a necessary evil to be used only at a time of great and Keynesian economics on page economic crisis. Nevertheless, the New Deal did not end the R42 in the Economics Handbook.) depression, and opposition grew among some parts of the population.

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Analyzing

CHANGING COURSE With hopes of lessening opposition to his programs, Roosevelt proposed a court reform bill that would essentially have allowed him to “pack” the Court with judges supportive of the New Deal. This cartoon shows Roosevelt as a sea captain ordering a shocked Congress to change course.

SKILLBUILDER Analyzing Political Cartoons 1. What “compass” did Roosevelt want to change? Explain. 2. How does the cartoonist portray FDR’s attitude regarding his power as president? SEE SKILLBUILDER HANDBOOK, PAGE R24.

Liberal critics argued that the New Deal did not go far enough to help the poor and to reform the nation’s economic system. Conservative critics argued that Roosevelt spent too much on direct relief and used New Deal policies to control business and socialize the economy. Conservatives were particularly angered by laws such as the Agricultural Adjustment Act and the National Industrial MAIN IDEA Recovery Act, which they believed gave the federal government too much control Contrasting over agriculture and industry. Many critics believed the New Deal interfered with E How did the workings of a free-market economy. E liberal and conservative THE SUPREME COURT REACTS By the mid-1930s, conservative opposition to critics differ in the New Deal had received a boost from two Supreme Court decisions. In 1935, the their opposition to Court struck down the NIRA as unconstitutional. It declared that the law gave leg- the New Deal? islative powers to the executive branch and that the enforcement of industry codes E. Answer within states went beyond the federal government’s constitutional powers to reg- Liberals: thought the ulate interstate commerce. The next year, the Supreme Court struck down the AAA New Deal did on the grounds that agriculture is a local matter and should be regulated by the not go far states rather than by the federal government. enough in help- Fearing that further Court decisions might dismantle the New Deal, President ing the poor and reforming the Roosevelt proposed in February 1937 that Congress enact a court-reform bill to nation’s eco- reorganize the federal judiciary and allow him to appoint six new Supreme Court Father Charles nomic system; justices. This “Court-packing bill” aroused a storm of protest in Congress and the Coughlin speaks Conservatives: press. Many people believed that the president was violating principles of judicial believed the to a radio New Deal independence and the separation of powers. As it turned out, the president got his audience in 1935. spent too much way without reorganizing the judiciary. In 1937, an elderly justice retired, and money on direct Roosevelt appointed the liberal Hugo S. Black, shifting the balance of the relief and was Court. Rulings of the Court began to favor the New Deal. (See NLRB v. Jones trying to control business and and Laughlin Steel Corp. on page 502.) Over the next four years, because of socialize the further resignations, Roosevelt was able to appoint seven new justices. economy. THREE FIERY CRITICS In 1934, some of the strongest conservative opponents of the New Deal banded together to form an organi- zation called the American Liberty League. The American Liberty League opposed New Deal measures that it believed violated respect for the rights of individuals and property. Three of the toughest critics the president faced, however, were three men who expressed views that appealed to poor Americans: Charles Coughlin, Dr. Francis Townsend, and Huey Long.

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Every Sunday, Father Charles Coughlin, a Roman Catholic priest from a suburb of Detroit, broadcast radio sermons that combined economic, political, and reli- gious ideas. Initially a supporter of the New Deal, Coughlin soon turned against Vocabulary Roosevelt. He favored a guaranteed annual income and the nationalization of nationalization: banks. At the height of his popularity, Father Coughlin claimed a radio audience conversion from private to of as many as 40–45 million people, but his increasingly anti-Semitic (anti-Jewish) governmental views eventually cost him support. ownership Another critic of New Deal policies was Dr. Francis Townsend, a physician and health ofﬁcer in Long Beach, California. He believed that Roosevelt wasn’t doing enough to help the poor and elderly, so he devised a pension plan that would provide monthly beneﬁts to the aged. The plan found strong back- ing among the elderly, thus undermining their support for Roosevelt. Perhaps the most serious challenge to the New Deal came from Senator Huey Long of Louisiana. Like Coughlin, Long was an early supporter of the New Deal, but he, too, turned against Roosevelt. Eager to win the presidency for himself, Long proposed a nationwide social program called Share-Our-Wealth. Under the banner “Every Man a King,” he promised something for everyone.

A PERSONAL VOICE HUEY LONG “ We owe debts in America today, public and private, amounting to $252 billion. That means that every child is born with a $2,000 debt tied around his neck. . . . We propose that children shall be born in a land of opportunity, guaranteed a home, food, clothes, and the other things that make for living, including the right to education.” —Record, 74 Congress, Session 1 Huey Long Long’s program was so popular that by 1935 he boasted of having perhaps as many as 27,000 Share-Our-Wealth clubs and 7.5 million members. That same year, however, at the height of his popularity, Long was assassinated by a lone gunman. As the initial impetus of the New Deal began to wane, President Roosevelt started to look ahead. He knew that much more needed to be done to help the people and to solve the nation’s economic problems.

1. TERMS & NAMES For each of the terms and names below, write a sentence explaining its signiﬁcance. •Franklin Delano Roosevelt •Federal Securities Act •Civilian Conservation •deﬁcit spending •New Deal •Agricultural Adjustment Corps (CCC) •Huey Long •Glass-Steagall Act Act (AAA) •National Industrial Recovery Act (NIRA)

MAIN IDEA CRITICAL THINKING 2. TAKING NOTES 3. EVALUATING 4. EVALUATING LEADERSHIP In a two-column chart, list problems Of the New Deal programs Do you think Roosevelt was wrong that President Roosevelt confronted discussed in this section, which do to try to “pack” the Supreme Court and how he tried to solve them. you consider the most important? with those in favor of the New Deal? Explain your choice. Think About: Explain your answer. Problems Solutions • the type of assistance offered by 5. DEVELOPING HISTORICAL each program PERSPECTIVE • the scope of each program The New Deal has often been • the impact of each program referred to as a turning point in Write a paragraph telling which American history. Cite examples solution had the greatest impact, to explain why. and why.

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